Steve Hanke argues the UAE’s reported exit from OPEC is a rational response to rising Gulf insecurity and a desire to pump more oil now, while he expects higher oil prices, persistent inflation, and a continued secular bull market in gold.
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The video is a host-led interview with Professor Steve Hanke about breaking news that the UAE will leave OPEC on May 1. Hanke says the move is not surprising and frames it through three lenses: the UAE has long wanted to produce more oil than OPEC quotas allowed; it expects real oil prices to fall over time, which incentivizes faster depletion today; and the war involving Iran has made Gulf producers feel less secure about future property rights and future production. In his view, higher insecurity raises the discount rate on future oil revenues, making immediate pumping more attractive. He says the UAE’s decision is driven by economics and security rather than a sudden political shock. He then broadens into a strongly bearish view of U.S. policymaking and the war in Iran, arguing Washington did not properly assess costs or unintended consequences. …
Near term, the setup favors higher oil and persistent gasoline pressure if Gulf insecurity keeps inventories tight and supply risk elevated. Gold may consolidate, but the bias remains upward rather than mean-reverting sharply.
Over the next few months, Hanke’s base case is that inflation stays sticky, oil remains supported, and gold resumes its climb after consolidation. Confirmation would come from continued credit growth, ongoing inventory draws, and no meaningful easing in geopolitical risk.
Structurally, he sees a world of durable gold uptrend, monetary debasement, and greater geopolitical fragmentation, with commodities benefiting from insecurity and resource control. The dollar remains dominant, but the global system is becoming less stable and more security-driven.
The UAE’s reported exit from OPEC is not a shock because the UAE has wanted to increase oil production for years and OPEC quotas have constrained it.
Hanke says the UAE wanted to produce more oil but was limited by quotas, making exit economically rational.
The UAE wants to pump more oil now because it expects real oil prices to be lower in the future.
He invokes his optimal production model: if real prices are expected to fall, it is rational to deplete faster today.
The Iran war has increased Gulf insecurity, lowering the present value of future oil revenues and encouraging faster near-term production.
He argues that if future property rights are less secure, producers discount future cash flows more heavily and pump faster now.
What are your thoughts on the UAE leaving OPEC, and what does it mean for oil markets?
Steve Hanke says the move makes sense because the UAE wants to pump more oil and has been constrained by OPEC quotas. He argues the UAE also expects real oil prices to fall and faces greater insecurity in the Gulf, both of which incentivize faster production now.
Was the UAE's OPEC exit a shock in Washington, and what are the consequences for the United States?
Hanke says it did not shock him because the incentives had been visible for a long time, but he says the U.S. is clueless about the broader consequences. He criticizes U.S. leaders for launching the war without understanding either the direct budget cost or the geopolitical fallout.
What is your view of the rationale for going to war with Iran?
He rejects the justification as Israeli propaganda and compares it to the Iraq WMD narrative. He says the case for war was built on a story he does not buy, and later adds that U.S. pressure may even increase the chance Iran gets a weapon.
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